New U.S. Sanctions on Rosneft and Lukoil: Implications for Global Oil Markets and Russias Economy

The initial sanctions imposed by the United States on Russia since Donald Trump’s return to the presidency have focused on the nation’s two leading oil companies, potentially causing waves in global energy markets.

These measures empower the U.S. to exert significant pressure on the international subsidiaries of Rosneft and Lukoil, while discouraging their foreign partners from engaging in business with them.

Trump has consistently advocated for restricting Russian oil exports to China and India, the two largest purchasers, in an effort to intensify financial pressure on the Kremlin and enhance leverage in possible negotiations regarding the ongoing war in Ukraine.

Here’s what we know about the implications of these sanctions:

**What will occur with Russia’s international energy assets?**

The sanctions introduce new challenges for Russia’s overseas energy initiatives and could hinder international trade.

On Monday, Lukoil announced its intention to divest its international assets, which constitute approximately a third of its overall operations, in light of the new measures.

The company’s most significant foreign undertaking is its 75% stake in Iraq’s West Qurna-2 oilfield, along with minority interests in gas-condensate projects in Kazakhstan and Azerbaijan. Additionally, it owns refineries in Bulgaria and Romania.

Rosneft’s principal international asset is a 49% stake in India’s Nayara Energy, operator of the Vadinar refinery, which ranks as the third largest in India, contributing around 8% of the country’s refining capacity. There has been no indication from the company regarding the future of this investment.

Since both companies hold minor stakes in many of their foreign projects, these ventures may avoid direct sanctions, according to Sergei Vakulenko, a former Russian oil executive and senior fellow at the Carnegie Endowment for International Peace.

Nonetheless, Vakulenko noted that the sanctions might render it “virtually impossible” for the sanctioned companies to receive dividends. They could also complicate interactions with suppliers, banks, and other partners.

**What is the status of Russia’s oil trade?**

India’s imports of Russian crude have skyrocketed from just 50,000 barrels per day in 2020 to approximately 1.8 million barrels per day in the first half of 2025, ranking only behind China’s 2 million barrels per day.

Earlier this year, Trump imposed a 25% tariff on India’s purchases of Russian oil and suggested that New Delhi should reduce these imports.

Even though the sanctions on Rosneft and Lukoil will not take effect until November 21, India’s largest private refiner, Reliance Industries, has already stated it will “adjust refinery operations to comply with requirements.”

Many other Indian refiners have paused their imports while awaiting further guidance, as reported by Reuters.

Nayara Energy, which has Rosneft as its largest shareholder, has not yet commented on the situation.

India’s position is precarious since alternative payment methods are limited if Washington blocks transactions based on dollars and dirhams, explained Alexei Gromov from the Energy and Finance Institute in Moscow.

Moscow has long expressed concerns that Indian rupees are not freely convertible, making local currency transactions impractical. Additionally, trade between India and Russia is too minimal and not diverse enough to support a complete barter system like the reported agreements Russia has with China.

**Will India change its approach?**

Analysts anticipate that India will reduce its Russian crude imports under pressure from the U.S., although it is unlikely to cease them entirely.

Technically, India could substitute Russian oil with supplies from the Middle East, Latin America, or the U.S., noted Kpler analyst Sumit Ritolia. OPEC countries are believed to possess over 3 million barrels per day of spare capacity that could help cover any shortfall.

However, whether India is ready to forgo discounted Russian oil remains uncertain.

In September, the price of Russia’s Urals blend was about $5 per barrel lower than Brent, though reports indicate that India’s effective discount shrank to $2-2.50 in October. Replacing these volumes with oil priced at market rates could raise India’s yearly import costs by between $1.5 billion and $3 billion.

“To effectively pressure India, Washington must not only continue to provide alternative supplies but also clearly convey that the new sanctions carry a real threat of secondary repercussions,” said Maximilian Hess, founder of Enmetena Advisory and a fellow at the Foreign Policy Research Institute.

The U.S. might target Russian assets in India by aligning with European sanctions on the Vadinar refinery, he suggested.

Ritolia predicted a “token reduction” of 100,000-200,000 barrels per day by India as a gesture of diversification.

Carnegie’s Vakulenko stated that India is likely to lower its purchase volumes rather than completely abandon them, especially considering the enforcement challenges facing the Trump administration amid the ongoing U.S. government shutdown.

**What are the implications for the Russian economy?**

Rosneft produces around 5.2 million barrels of oil per day, representing roughly 40% of Russia’s total output, while Lukoil generates approximately 1.6 million barrels.

Following the announcement of the sanctions, Lukoil’s share price fell from 6,000 rubles on October 22 to about 5,434 rubles on Monday, a decline of around 9.4%. Shares in Rosneft dropped about 7% during the same period, decreasing from 402 rubles to 374 rubles.

If India reduces its purchases, Russia could encounter a revenue shortfall, forcing the Kremlin to either increase taxes or cut expenditure to balance the budget for 2026.

While China might absorb some surplus oil, it remains unclear if it can take all of it, according to Hess.

There is a historical precedent; when India scaled back its purchases in August, Chinese refiners reportedly took an additional 15 cargoes of Russian crude for delivery in October-November, as per Reuters.

Nevertheless, sustained U.S. pressure could compel Moscow to offer deeper discounts—up to 20-25% below Brent prices—or pay intermediaries more, which would diminish long-term export revenues, Grigory Sosnovsky, director of the Moscow-based N1Broker firm, told the RBC news site.

If demand does not rebound elsewhere, Russia may need to curtail production due to limited storage capacities, warned Carnegie expert Vakulenko.

A prolonged decline in export volumes without a corresponding increase in prices would pose significant challenges to executing the 2026 budget, he added.

This year, Russia’s oil and gas revenues are expected to total 8.7 trillion rubles ($91.6 billion)—the lowest figure since 2020.

The preliminary budget for 2026 anticipates a slight recovery to 8.9 trillion rubles ($93.7 billion), with total federal income rising to 40.3 trillion rubles ($424 billion) from 36.5 trillion rubles ($384 billion) in 2025.

Energy revenues constitute about a quarter of the total budget income, but any decline in oil revenues could have a broader economic impact, affecting corporate tax and VAT revenues—Russia’s main sources of non-energy income, according to Vakulenko.